Avalara (AVLR), EverQuote (EVER), Fiverr (FVRR), Cardlytics (CDLX), Inspire (INSP) and Palomar (PLMR) Report
Avalara (AVLR) beat expectations in Q2 with revenue of $117 million up 28% (beating by $6 million) and adjusted EPS of $0.04 beating by $0.14. Management said June was the best non-December month of bookings ever and that big-picture tailwinds such as e-commerce, cloud software adoption, efficiency initiatives and regulatory compliance are driving intense demand for sales tax automation software. The pandemic is helping.
Customer count grew by 590 over the previous quarter to 12,710 and rose 28% as compared to the year-ago quarter. Management also gave full-year revenue guidance of $465 million to $470 million, better than the consensus of $460 million. The significant earnings beat illustrates that this business can crank out profits at scale.
Free cash flow was positive ($6 million) and the company ended the quarter with $474 million. Avalara is tapping the market for an equity raise so they can ramp up acquisitions. Management is targeting a $500 million stock offering with all the proceeds going to the company. That’s a nice chunk of change. Pricing has not yet been announced. I’m not expecting a huge reaction from this report but do think once the stock offering is priced that it will be absorbed quickly and shares will trend higher. Aggressive investors can pick up a few shares here but I’d like to see how the secondary is handled before officially moving to buy. HOLD
EverQuote (EVER) reported yesterday and results missed on both the top (barely) and bottom line. Revenue grew by 41% to $78 million (missing by $640,000) while adjusted EPS of -$0.10 missed by $0.06. Revenue from non-auto verticals (home and renters, life, health and commercial) was up 133% to $14 million while auto was up 30% to $65 million.
Management also announced expansion into health with the acquisition of the Crosspointe Insurance & Financial Services, a health insurance agency started in 2016 that sells direct-to-consumer (DTC) via a data-driven sales support contact center. The target brings in new carrier partners and generated $4 million in revenue in 2019. The purchase price is $15 million and Crosspointe should be profitable. Management is clearly excited about the potential in health and said it does not plan to go DTC in any other channels right now.
Overall, the business seems to be cranking along and full-year revenue guidance was up by $11 million (3%) to a range of $331 million to $336 million (above consensus of $330 million).
So why is the stock down? Whenever you get a “miss” in a high-growth, high-expectation stock like this the market can punish it. A roughly 20% drop seems quite overdone to me since the future continues to look bright and assuming management has a rational plan to expand rapidly in health there’s potential for significant growth there. I’m not in favor of letting this stock go right here and think we can buy into the weakness. If we don’t get a meaningful rebound within a week I may change my tune, but for now I’m moving EVER back to buy. BUY
Fiverr (FVRR) went into earnings with high expectations and crushed it. Revenue was up 82% to $47 million, beating by $10.6 million (that’s huge) while adjusted EPS of $0.10 beat by $0.17 (also huge). Active buyers rose by 28% to 2.8 million and spend per buyer rose 18% to $184. Management is going after the freelance market with intensity; Promoted Gigs are now available in 15 categories, there are two new local-language sites (Italian and Dutch) and Fiverr Business was just introduced, which is a dedicated environment for business buyers. This move pushes Fiverr into a bigger market than individual freelancers.
Management raised guidance for 2020, saying it sees revenue up 66% to 68%. Not surprisingly the stock is rallying after the report (up around 15%) and our paper gain goes to roughly 245%. I love the quarter and the potential but for now I’m keeping at hold. HOLD
Cardlytics (CDLX) reported a mixed quarter with revenue of $28 million (down 42%) missing by $2.6 million while adjusted EPS of -$0.38 beat by $0.09. Management said what we were all expecting – that consumer spending is improving but remains dramatically impacted by the pandemic and it’s very tough to forecast where it will go. July brought about a pause, but management sees room for improvement in the coming months and is working with marketers in new areas of growth that can help offset some of the pullback in spend in the restaurant, travel and physical retail sectors.
While things are a bit slow on the spending front management is working on platform enhancements, including self-service and automation, with two agency-based marketers in test mode. This is a long-term growth initiative but it’s nice to see the team making use of this time to advance projects that should pay off once things improve. Cardlytics is also working on richer media offers that should attract more eyeballs than the simple logos the platform currently displays. Combining this with more users from the launch with Wells Fargo and the upcoming launch with U.S. Bank means well over 150 million monthly average users (MAUs) will begin to see offers soon.
The short version here is that Cardlytics is not out of the woods yet and can only do so much to juice the business and prepare for better times ahead. Ultimately, those better times need to arrive for the stock to work. In the meantime, we’ll keep at hold. Shares are down meaningfully today and will likely bounce around for some time given this lackluster report. We’d like to see them hold around 60, or not much lower. Should a downtrend develop we will cut the stock and revisit the idea later. HOLD
Inspire (INSP) surpassed expectations when it reported yesterday. Revenue was down 32% to $12.2 million but came in $4.3 million better than expected while adjusted EPS of -$0.88 beat by $0.20. Management announced that it activated 16 new U.S. medical centers in Q2 and that Medicare coverage for Inspire Therapy now extends across the entire U.S. Cigna, with 16 million members, is also now providing coverage.
While procedures were postponed in March and April the pipeline was building through virtual community health talks and management says significant numbers of patients are completing sleep endoscopy screening and are being scheduled for Inspire therapy.
Most importantly, management has the confidence to issue full-year guidance with revenue now expected to rise 7% to 12% ($88 million to $92 million), which is a far cry better than the 2% decline (to $80 million) that analysts had expected. We’re getting a relief rally today that has sent INSP to new highs. Keeping holding on. HOLD
Palomar (PLMR) beat expectations as well with revenue up 67% to $43 million (beating by $6 million) while adjusted EPS of $0.52 beat by $0.03. Gross written premiums jumped 44% while net premium written growth was 59%. Net investment income jumped 43% to $2.1 million as the company invested cash from operations and proceeds from the January 2020 secondary stock offering. Management continues to grow in existing verticals (earthquake, hurricane, etc.) and expand into others (excess and surplus), which should keep the growth story very much alive. For the full-year management reiterated earnings guidance of $50.5 to $53 million (up 33% to 40%). The stock’s trading at fresh highs on the report and I suspect it has more room to run. This is one of those sleeper stocks that can keep climbing until one day almost out of nowhere you’re sitting on a big gain, but don’t remember anything about the journey. BUY